Vermont Medical Deduction

Overview

If you claim medical expenses on your federal individual income tax return, Vermont allows you a limited deduction for medical expenses on your Vermont income tax return.

The Vermont medical deduction became effective Jan. 1, 2019, beginning with tax year 2019. See 32 V.S.A. §5811(21)(C). The Vermont medical deduction is an amount equal to the itemized deduction for medical expenses on the federal return reduced by the following:

  • Vermont standard deduction
  • Vermont personal exemption(s)

and

  • Any amounts deducted federally attributed to an entrance fee or monthly payments to a continuing care retirement community that exceed the deductibility limits. The deductibility limits are shown in the table below.

For these fees or payments, the deductibility for Vermont is limited by an amount equal to the federal deductibility limits for qualified long-term care insurance contracts under 26 U.S.C. 213(d)(10)(A).

How to Calculate the Deduction

If you claim the medical deduction on federal Schedule A (Form 1040), Itemized Deductions, you are allowed to claim the Vermont medical deduction.

  1. Begin with the amount you’ve calculated and entered for “Medical and Dental Expenses” on federal Schedule A.

  1. Subtract the a) Vermont standard deduction and b) Vermont personal exemption(s) you are claiming on Form IN-111, Vermont Income Tax Return.
  2. Subtract any amounts deducted federally that are attributed to payments of entrance fees or recurring monthly payments made to a continuing care retirement community that exceed the deductibility limits (see the table below) for premiums paid during the year for qualified long-term care insurance contracts.
TABLE: DEDUCTIBILITY LIMITS
For tax year 2019, continuing care retirement community fees or monthly payments deductible as a Vermont medical expense are limited to:
Limitation on Premiums Attained age before the close of the tax year
$420 Age 40 or less
$790 Age 41 to 50
$1,580 Age 51 to 60
$4,220 Age 60 to 70
$5,270 Age 71 and over
The 2019 limitations are from IRS Revenue Procedure 2018-57. These limits are published annually.
  1. Enter the resulting amount on Vermont Schedule IN-112, Vermont Tax Adjustments and Credits.

Examples

Example 1

For tax year 2019, a married couple (with no children) has $100,000 in federal adjusted gross income, and $50,000 in medical expenses, the federal deductible amount of medical expense would be $42,500 (total medical expense $50,000, minus $7,500 which is the floor of 7.5% of the Federal AGI). The deductible amount for medical expenses for the Vermont income tax deduction is $21,700.

Federal deductible medical expenses: $42,500
Subtract $12,300 (Vermont standard deduction)      -$12,300
Subtract $8,500 (two Vermont personal exemptions) -$8,500
Deductible Vermont medical expenses equals $21,700
Enter $21,700 on Vermont Form IN-112 on the line for the “Medical Expense Deduction.”

Example 2

For tax year 2019, a married couple ages 65 and 66 (with no children) have $100,000 in federal adjusted gross income and $50,000 in medical expenses ($20,000 of which was for an entrance fee or monthly payments made to a continuing care retirement community). The federally deductible medical expenses would be $38,440.  The Vermont deductible medical expenses are $4,080.

Federal deductible medical expenses $38,440
Subtract $14,300 (Vermont standard deduction for two seniors) -$14,300
Subtract $8,500 (two Vermont personal exemptions) -$8,500
Since the $20,000 expense for the CCRC exceeds $4,220 per person, only $4,220 per person is allowed for the Vermont deduction. The difference must be subtracted from the federal deduction.  
$20,000 - $8,440 -$11,560
Deductible Vermont medical expenses equals $4,080
Enter $4,080 on Vermont Form IN-112 on the line for the “Medical Expense Deduction.”